Finance

Rating agencies like Gov. Gavin Newsom's focus on one-time spending, but warn that the Legislature could upset the applecart by creating ongoing programs.

The mammoth Sacramento-based health system experienced ratings downgrades in 2021 under the threat of multiple lawsuits, seismic costs and COVID-19 challenges.

Municipals posted gains for the first time in 2022 in May, outperforming U.S. Treasuries on the month. The Bloomberg Muni Index posted a 1.49% return in May bringing losses down to 7.47% year to date.

An April COVID hospitalization surge, along with a continuing labor shortage and inflationary and supply chain costs, hurt hospitals' bottom line.

The GOP-controlled state legislature adjourned without passing a bill barring government contracts with firms, including banks that underwrite municipal bonds, if they “discriminate” against the firearm industry.

June redemptions will be the highest of the year at $50.6 billion. New-issue supply — 30-day visible is currently at $15.5 billion — is unlikely to keep up.

The rapid swing to lower yields over the past week has led to a sunnier outlook for the summer reinvestment season, but uncertainties on the economic front, rate volatility, and supply questions hang overhead.

Investors will be greeted Tuesday with a decrease in supply with the new-issue calendar estimated at $2.691 billion in $1.786 billion of negotiated deals and $904.9 million of competitive loans.

The rating agency said the action reflects significant progress the state has made restoring its financial reserves and liquidity in recent years.

Municipals improved for the fifth session in a row with 10- and 30-year triple-A yields falling 30 basis points since Thursday. Connecticut priced $1 billion-plus of GOs and saw yields lowered in a repricing.

Several major technicals are beginning to improve in the muni market, said Burt Mulford, portfolio co-manager of fixed and strategic income at Eagle Asset Management.

The amount of money parked at a major Federal Reserve facility climbed to yet another all-time high, surpassing the $2 trillion milestone for the first time, as investors struggled to find places to invest their cash in the short term.  

Fixed-income markets have had a tough 2022 but municipal bonds have been among the ones that have struggled the most.

Elected officials in Republican-dominated states say S&P Global Ratings, by introducing ESG analysis, is politicizing the ratings process or even possibly acting illegally.

Given the volatility of risk assets is likely to remain high, and the focus on the flight to safety increases, all fixed-income assets could benefit as a result, including municipals, Barclays strategists say.

Refinitiv Lipper reported $2.712 billion of outflows, bringing the total outflows so far in 2022 to $65.8 billion, surpassing the last largest annual outflows of $63.5 billion during the Taper Tantrum in 2013.

Investors pulled $7.270 billion from muni bond mutual funds in the week ending May 11, per ICI data, while exchange-traded funds saw $1.756 billion of inflows, the fourth week of record inflows.

SWS has launched a specialty higher education sector group that will be led by Julia Harris from the firm's Chicago office.

On the buy-side, weakness, outflows, supply issues, and poor liquidity are making life challenging for municipal bond investors. The same could be said for issuers.

While only 12% to 15% of municipal bond trading volume is performed electronically, various market participants say the time to embrace new technologies is now.